Easyjet PLC (LSE: EZJ) ‘s heavy fall in losses at low-cost airlines proved to be “a clear rebound of financial performance,” according to Gerald Khoo, Liberum Capital’s transport analyst.
Khoo stated that “the underlying trend was obscured by Omicron-related restrictions during the first half” and “operational disruption in the third quarter”, but easyJet “has made many structural changes that should make the airline more profitable, all others being equal, once its capacity returns back to pre-pandemic levels.”
He concluded that “while the economic outlook remains uncertain and there are headwinds due to jet fuel costs and currency rates, we believe that the ongoing recovery potential, strategic progress, and the current valuation are not fully reflected”
Structural improvements include an increase in seasonal pilot contracts, seizing slot opportunities at congested airfields to allocate more aircraft to more profitable bases, as well as improvements in ancillary revenue streams such as EasyJet Holidays.
Liberum reiterated its Buy rating, setting a target price at 430p to match the current share price, 387.20p. The analyst stated that this price “more than reflects external risks while giving little credit for strategic progress made by the group.”
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